In minutes, billions lost in Greek market

An employee works on the Athens Stock Exchange in Greece on Monday.
An employee works on the Athens Stock Exchange in Greece on Monday.

ATHENS, Greece -- Greece's top companies lost billions in market value in a matter of minutes Monday when the stock exchange plunged upon reopening after a five-week closure.

The main stock index shed more than 22 percent just minutes into the opening, as investors got their first opportunity to react to recent developments in the Greek economy.

The index closed 16.2 percent lower, with bank shares hitting or nearing the daily trading limit of a 30 percent loss. Collectively, Greek-listed companies lost about a sixth of their market value -- almost 8 billion euros, or $8.7 billion. At the current exchange rate, 1 euro equals about $1.10.

"There's a sense of panic," said Evangelos Sioutis, financial analyst and head of equities at Guardian Trust. He noted that some traders were selling stock to raise cash because there is so little liquidity in the Greek economy.

"There are no buyers," he said. "The outlook is not clear."

The last comparable plunge was in 1987, when the main index lost 15 percent.

Markets in the rest of the world, however, were largely unaffected. European shares closed higher.

The Athens stock market and Greek banks were closed June 29, when the government put limits on money withdrawals and transfers to keep a run on the banks from taking down the financial system. People were panicking about the prospect that the country could fall out of the euro after its talks with international creditors broke down.

The country's radical leftist government has since capitulated to creditors' demands for new austerity measures, and the sides have resumed talks on a new bailout -- the third since June 2010 -- worth 85 billion euros, or $93 billion, over the next three years. Banks have reopened, but strict limits on cash withdrawals remain.

Financial information company Markit said its gauge of manufacturing activity in Greece plummeted in July to 30.2 points, its lowest-ever reading, despite improvements across the rest of the 19-country eurozone.

"Manufacturing output collapsed in July as the debt crisis came to a head," Markit economist Phil Smith said.

"Factories faced a record drop in new orders and were often unable to acquire the inputs they needed, particularly from abroad, as bank closures and capital restrictions badly hampered normal business activity."

Despite a brief spell of weak growth last year, the economy is shrinking again after a recession that wiped out more than a quarter of output, cost more than a million jobs and prompted mass emigration of skilled professionals.

Meanwhile, a monthly survey of business and consumer confidence, the Economic Sentiment Indicator, fell for a fifth consecutive month in July to its worst level since October 2012.

Greece is in intense negotiations with lenders to negotiate the terms of the new rescue package in the next two weeks.

The country needs to complete the talks and receive more loans before Aug. 20, when it has to repay more than 3 billion euros, about $3.3 billion, to the European Central Bank.

Deputy Finance Minister Dimitris Mardas did not comment on reports that Athens could seek a short-term loan to tide it over in case the talks have to be extended.

"The [negotiation] timetable is truly pressing ... We are preparing for what has been agreed upon, correcting any gaps that may appear," Mardas told private Skai television.

Negotiators from the European Union and International Monetary Fund are seeking faster cuts in early retirement plans set out by the government, and stricter conditions for a tax-arrears payment program.

The negotiators are due to meet today with Greece's ministers of finance and economy to discuss new taxpayer-funded cash injections for the country's banks, as well as plans for large-scale privatizations of state-owned assets.

Prime Minister Alexis Tsipras is facing strong opposition to the new bailout from within his Syriza party.

Nearly one-fourth of his lawmakers rejected or refused to back creditor-demanded tax increases and other economic measures in votes last month. Although Tsipras nominally retains a parliamentary majority -- the dissenters remain within his party -- he depends on opposition support to pass new legislation.

Syriza dissenters are calling for a return to the country's old drachma currency but failed last week to force an emergency party conference.

"The government has to choose between a humiliating agreement to sign a third bailout, or abandon the agreements reached in Brussels and seek alternatives for a positive course out of this crisis," former Welfare Minister and prominent dissenter Dimitris Stratoulis said.

Information for this article was contributed by Paris Ayiomamitis of The Associated Press.

A Section on 08/04/2015

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